When investing in shares it is important to keep in mind that they involve a higher level of risk than other types of investment, such as bonds and deposit accounts. But what exactly is this risk and how should we deal with it?

In an everyday context risk tends to have negative associations if we "take a risk", for example, we are normally worried something bad could happen. This is part of the meaning of investment risk, but it is not the whole picture.

Investment risk is a measure of the volatility of your returns. In other words, it is the chance that your investment could fall in value, but it is also an indication of growth potential. This means it is closely linked with investment opportunity. Higher-risk investments are generally considered to offer the opportunity for higher levels of growth though, of course, this is not guaranteed.

This is why it's important to see risk as a normal part of investing. Put simply, you have to take a degree of risk if you are to have any chance of achieving strong returns.